Monday, May 25, 2020

The Federal Reserve System Is The United States Central Bank

Hayden Hill Macroeconomics Professor Gislason 27 April 2017 The Federal Reserve System The Federal Reserve System, also called â€Å"the FED†, is the United States central bank, a national institution which governs the production and distribution of money. It was created to provide the United States with a more secure and more stable financial structure. The Federal Reserve System has many responsibilities today. First, the FED controls U.S. monetary policy by altering the supply and demand of the economy in order to keep the market at potential level of output. Second, it oversees the regulation of the nation’s banks and other financial institutions to ensure fairness and accuracy. Third, it maintains the stability of the economy by†¦show more content†¦1893 and 1907 contained huge banking panics that made many Americans question the banking system. Most Americans began advocating a banking reform. Establishing a central banking authority seemed to be the best thing for the economy and the country. In 1912, president W oodrow Wilson was elected president with a plan to fix the nation’s banking problems. With help from advisors, Woodrow Wilson was able to propose the Federal Reserve Act in 1913. The Federal Reserve Act created the Federal Reserve System, a central banking system with the ability to issue Federal Reserve Notes and bank notes as legal tender (â€Å"History of the Federal Reserve†). So, the Federal Reserve is a central banking system. But what exactly is a central bank? The central bank gets its name, â€Å"central† because there is only one in a country, and it is the central source of money supply and banking in an economy. A central bank has been described as â€Å"the lender of the last resort† meaning that it is in charge of funding the economy when commercial banks cannot cover shortages. The central bank is intended to keep the United States banking system from crashing. The main goal of the central bank is to constrain inflation by regulating U.S. monetary policy. The central bank is considered the â€Å"government’s bank† because it controls government securities and other instruments used to control monetary policy, but remains free fromShow MoreRelatedThe Federal Reserve System And The United States Central Bank1196 Words   |  5 PagesThe Federal Reserve System (hereafter referred as the Fed) is the United Statesâ€℠¢ central bank (Federal Reserve.gov 1). Formed by the United States Congress in 1913 and signed into law by President Woodrow Wilson, the intention behind its creation was to offer a safer, more stable, and more flexible financial and monetary system for the United States (Federal Reserve.gov 1). 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